Apple Earnings Report Preview: Forget the iPhone 5, Will iPads Miss?

Until next time.

Tomorrow after the close, heavyweight Apple (NASDAQ:AAPL) steps up to the earnings plate for its fiscal fourth quarter report. Due to its size, the company's results have a disproportionate effect on both the market and the tech sector. Other tech giants like Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT) have put up uninspiring figures lately, largely due to the slow PC market.

Forget the iPhone 5The iPhone 5 was launched on Sept. 21, meaning the new device was only on sale for nine full days before the fiscal quarter closed. In that time, Apple sold 5 million units on launch weekend, but was promptly plagued by supply constraints that left many consumers wanting more. That figure disappointed investors, as they clearly wanted more, too.

Unit estimates for the iPhone 5 reach as high as 10 million for the quarter, which is something of a stretch but potentially doable when you look at clues fromVerizon's (NYSE:VZ) iPhone activation figures. Big Red activated 3.1 million iPhones last quarter, including 651,000 iPhone 5 units. AT&T (NYSE:T) just said it activated 4.7 million iPhones last quarter, with iPhone 5 constraints leading to most of those units going to existing customers.

While the iPhone 5 was the most important product launched during the quarter, it's effect on overall results will be muted by the fact that it was only on sale for such a limited amount of time as well as the aforementioned shortages. That's why I'm less focused on iPhone 5 unit sales this quarter.

Overall iPhone unit sales of all models will be much more important, and analysts are looking for this figure to come in around 27 million.

An iPad "miss"?Just like last quarter, I remain more concerned with iPad unit shipments as Apple ramps up from its most recent launch. The fiscal third quarter posted a strong 5.2 million sequential increase to 17 million units in the wake of the third-generation model's release. Google (NASDAQ:GOOGL) launched its Nexus 7 in July, so investors will be interested to see if that tablet has made any meaningful dent in iPad sales.

Apple just said that it had sold the 100 millionth iPad a couple weeks ago. While that's an incredible milestone for a device that's just 2.5 years young, it also implies that iPad unit sales will be just 16 million -- below the 18 million that the Street is expecting. The Nexus 7 could potentially have stolen some iPad sales and we may have an iPad "miss" on our hands here, folks.

Back to the MacMacs probably won't be particularly impressive. The PC market is in the dumps, and Apple's not immune to that sluggishness, either. Gartner estimates that Apple's domestic PC shipments fell 6% in the third quarter. That's just part of the picture, but I wouldn't be surprised if Macs post a year-over-year decline. Last quarter, unit sales grew by a measly 1.8%.

The good news, however, is that the Mac is only 15% of trailing-12-month sales, so weakness there won't drag down overall results. CEO Tim Cook likes to brag about how many consecutive quarters the Mac has outpaced the broader PC market, with the running tally currently up to 25. With the global PC market shrinking 8.3% last quarter, any decline less than that -- which shouldn't be hard for Apple to do -- would continue the streak.

On top of that, much of the Mac lineup was in need of an update (which occurred yesterday), so sales may have been soft leading up to expected upgrades.

Until next timeThis is typically a seasonally slow quarter for Apple and other consumer electronics players. Next quarter, however, will be the real test as consumers gear up for the holidays. For what it's worth, next quarter I'll change my tune. Three months from now when Apple reports fiscal first quarter results in January, I'll say, "Forget the iPad, let's talk iPhone." That release will be all about the iPhone 5.

Author

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker, and worked briefly at Tesla Motors. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.
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